Banks Increase Agricultural Lending to N3.86tn as Oil and Gas Credit Declines

By Benson Daniel

Nigerian banks have increased their exposure to the agricultural sector, with credit to agriculture rising to N3.86 trillion as lending to the oil and gas industry records a decline, reflecting a gradual shift in the banking sector towards financing other productive areas of the economy.

The movement comes as banks respond to efforts to diversify Nigeria’s economy away from heavy dependence on crude oil and strengthen financing for sectors capable of supporting employment, food production and broader economic growth.

Agriculture remains one of the sectors with significant potential for increased private sector investment in Nigeria. However, farmers and agribusinesses have historically faced difficulties accessing affordable credit because of perceived risks, inadequate collateral and uncertainty around agricultural production.

The increase in bank financing therefore represents an important development for the sector, particularly at a time when the Federal Government is placing greater emphasis on food security, mechanisation, agro processing and the development of agricultural value chains.

The 2026 economic programme places agricultural financing among its priorities, with measures focused on improving access to inputs, expanding mechanisation, strengthening irrigation and supporting storage and processing facilities. The government has also outlined plans for the Bank of Agriculture to provide affordable financing to millions of smallholder farmers.

The shift in bank lending also comes against the background of changing conditions in the oil and gas sector. While petroleum remains a major component of Nigeria’s economy and financial system, banks have increasingly had to reassess their exposure to the sector amid concerns over project risks, repayment capacity and the need to diversify loan portfolios.

Greater lending to agriculture could provide banks with an opportunity to participate in the expansion of food production and agro industrial businesses while spreading their credit exposure across a wider range of economic activities.

For farmers and agricultural businesses, increased access to bank credit could help finance the purchase of equipment, improved seeds, fertiliser, irrigation systems and other inputs needed to raise productivity.

It could also support businesses involved in processing, transportation, storage and marketing, allowing more value to be retained within the agricultural sector instead of leaving the country as a result of raw commodity exports.

However, the growth in agricultural lending also presents challenges for banks. Agriculture remains vulnerable to climate conditions, insecurity, market price fluctuations and other risks that can affect farmers’ ability to repay loans.

Financial institutions will therefore need to strengthen risk assessment and develop lending products that reflect the seasonal nature of agricultural production.

The expansion of agricultural credit is also expected to support the government’s wider efforts to reduce food inflation by increasing domestic production and strengthening supply chains.

A stronger flow of credit into agriculture could help businesses expand their operations and create jobs, particularly in rural communities where farming and related activities provide the main source of income for millions of Nigerians.

The development further highlights the changing structure of Nigeria’s banking industry, as financial institutions seek opportunities beyond traditional oil and gas financing.

If sustained, the trend could contribute to a more diversified credit market and provide greater financial support for sectors that have traditionally struggled to attract adequate private capital.

For Nigeria, the challenge will be ensuring that increased agricultural financing translates into higher productivity rather than simply higher loan volumes. Effective monitoring, appropriate risk sharing and improvements in infrastructure will remain critical to ensuring that bank credit produces sustainable results.

With banks increasing their exposure to agriculture while reducing their concentration in oil and gas, the shift could become an important part of Nigeria’s broader economic diversification drive.